Which Federal Agencies Investigate PPP Loan Fraud - Scrofano Law, PC (2024)

FAQs

Who is investigating PPP loan fraud? ›

The U.S. Small Business Administration (“SBA”) is auditing all companies that received PPP loans of $2 million or greater, while the Department of Justice (“DOJ”) and other federal agencies are ramping up the number of investigations and prosecutions of PPP loan fraud.

§ 371 and 18 U.S.C. § 1349) – Conspiring to commit PPP loan fraud is a federal offense that can lead to penalties up to and including the same penalties imposed for the “successful” commission of a PPP loan fraud offense.

Bank Fraud: If you lie on your PPP loan application, this is looked at as deceiving a financial institution for profit. You can be charged with bank fraud, under U.S. Code Title 18 U.S.C. 1344. Bank fraud is a white collar crime, and the penalty will vary based on the situation.

The short answer to this question is: "yes." If a portion (or all) of your PPP loan was forgiven improperly, you may be subject to IRS penalties as well as potential civil and criminal prosecution.

Several common issues can arise in PPP loan fraud cases:

You may have a defense if you made an honest mistake or were unaware that you were providing false information. Insufficient evidence: The prosecution must also provide sufficient evidence to support their allegations of fraud.

PPP Detective was created to crowdsource fraud detection for the SBA's Paycheck Protection Program.

H.R. 7352, the “PPP and Bank Fraud Enforcement Harmonization Act of 2022,” which establishes a ten-year statute of limitations for fraud by borrowers under the Small Business Administration's Paycheck Protection Program.

PPP loan fraud involves providing false information or misusing funds obtained through the Paycheck Protection Program. This can include falsifying information on loan applications, inflating payroll expenses, using funds for unauthorized purposes, creating fake businesses, or conspiring with others to commit fraud.

While the CARES Act itself didn't contain specific criminal penalties, PPP fraud can lead to many different potential charges under pre-existing federal fraud laws, including: Wire fraud (18 USC §1343) – up to 30 years imprisonment. Bank fraud (18 USC §1344) – up to 30 years imprisonment and $1 million fine.

Possible violations that could trigger a PPP fraud investigation include: Making false statements on your PPP loan application. Using the loan funds for purposes other than those allowed by the PPP guidelines. Falsifying your employee headcount or payroll expenses.

How does a PPP loan get flagged? ›

Here are some circ*mstances behind why a red flag could be applied on a loan application: The company applied for multiple PPP loans from different lenders. The company made false statements on their PPP loan application. They submitted an incomplete PPP loan application.

While PPP loans are generally non-recourse to the owners of a borrower, if and to the extent loan proceeds are used for unauthorized purposes, the owners may have personal liability for repayment.

By hiring an FCA attorney, a PPP loan fraud whistleblower may file a qui tam lawsuit against the fraudster on behalf of the U.S. government. In successful qui tam suits, PPP loan fraud whistleblowers are elgible to receive an award between 15 and 30 percent of the funds recovered.

Who will be audited? PPP loans in excess of $2 million are automatically triggered for an audit by the SBA. The SBA has created a safe harbor for any PPP loan borrower that, together with its affiliates, received loans of less than $2 million.

Typically, the SBA has been responsible for PPP loan audits. But now, the IRS, too, is targeting businesses who may have fraudulently received loan forgiveness. That's because loan forgiveness granted on the basis of misrepresentations or omissions is included in taxable income.

They are most likely trying to determine your eligibility for the PPP loan. They have been auditing records to ensure people did not lie on applications. Doesn't matter that your PPP was funded and forgiven. If you did fudge some of the numbers on your application, you should consider getting an attorney involved asap.

Most Paycheck Protection Program loans have been forgiven despite billions of dollars going to undeserving recipients. But some companies are voluntarily paying back their loans.

According to the government, Hamza Abbas, Ammas Uddin, Arham Uddin, Syed Ali, Muhammad Anis, and Jesus Acosta Perez collaborated to submit false PPP loan applications, including potentially inflated employee counts and payroll expenses.

The table below outlines all three rounds of PPP loan funding.